Nov 252010
 
The United States Supreme Court.
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Article first published as American Corporations are all About Profits – Not People on Technorati.

Have you heard the news that corporate profits hit an all-time high this past quarter? That’s right, with unemployment stuck near double digits and the wages of American workers continuing to fall, American businesses racked up profits at an annualized rate of $1.66 trillion.

So, even though they themselves may be hurting, shouldn’t patriotic Americans cheer these profits? After all, we have a huge federal budget deficit, and at least the tax revenues from these huge profits will improve the shortfall, right?

Wrong. The sad truth is that American corporations aren’t all that American, and they’re certainly not patriotic. General Electric, fourth on the Fortune 500, had an excellent year in 2009, making profits of $10.3 billion. Their U.S. tax bill? Uncle Sam owed them $1.1 billion. How does that happen?

Well, somewhere in their 24,000 page tax return are the details of how they consistently manage to make serious profits overseas but lose money in the U.S..

A similar story applies to Exxon Mobile, our nation’s most profitable company. Their profits for tax year 2008 climbed to a record high of $42.5 billion — the most ever for an American company. They did wind up having to pay $15 billion in income taxes, but unfortunately for Americans, none of that money was paid to the IRS. Exxon’s U.S. tax bill was a whopping zero dollars.

Sadly, these companies are anything but alone in their ability to exploit tax loopholes and dodge paying U.S. taxes. In fact, a 2008 study prepared by the Government Accountability Office (GAO) reported that two out of three American corporations paid ZERO, zip, nada in federal income taxes from 1998 through 2005.

Unlike average Americans, corporations enjoy considerable flexibility in both operations and the resulting tax treatment. Exxon, for example, has several wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that allow them to legally shelter cash flow. Other corporations, like Google, who was recently able to reduce its effective tax rate to just 2.4%, accomplish their magic by shuffling income through foreign countries using well-known tax strategies like the “Double Irish” or “Dutch Sandwich.”

Google’s use of the “Double Irish” maneuver depends on shifting non-U.S. sales to its Dublin office — 88% of its $12.5 billion in 2009. This technique is also used by others, like Microsoft, and requires that they have two Irish companies (hence the “double”) where one pays royalties to the other which collects the proceeds in a tax haven, like Bermuda.

Make no mistake about it, the use of tax havens is commonplace in corporate America. Another GAO study reported that 83 of the 100 largest American companies have subsidiaries in tax havens. It’s estimated that through the use of such havens, corporations and wealthy individuals are able to evade more than $100 billion in U.S. taxes every year. ATT, GE, IBM, Chevron, they all participate in the dodge.

Even those companies with government contracts, like Boeing, and those who took government bailout money, like AIG, GM, Goldman Sachs and Citicorp play the game. The truth is that the evasion occurs on such a grand scale that 18,000 companies share a single address in the Cayman Islands, a popular haven because of its lack of any corporate or capital gains tax.

What should be done about all of this? Some people advocate the closing of loopholes to prevent such activities. Others suggest that completely eliminating corporate taxes and treating corporate profits as the individual income of its shareholders would be a superior remedy. But whatever the solution, the core truth of the situation remains evident — 21st  Century corporations have no nationality.

Like it or not, we now live in a global economy. Billions of dollars in U.S. tax revenue is being hidden in foreign banks, and millions of American jobs have been offshored to foreign workers. American corporate profits are at an all-time high even while huge numbers of Americans are suffering. The sad truth is that American corporations have but one loyalty, and it’s not to our nation, nor is it to the American people; they are singularly focused on profits, and their only loyalty is to their shareholders.

There’s nothing really wrong with this specific truth. Corporations are legal fictions created for the purpose of making money. They are rightfully focused solely on profits. But there is something seriously wrong with assigning to these artificial entities the rights associated with being a person.

This is exactly what the Supreme Court of the United States (SCOTUS) did in its decision on Citizens United versus the Federal Election Commission. In conferring personhood upon corporations and assigning full First Amendment protections for free speech, the SCOTUS not only made it perfectly legal for companies to lie but also opened a Pandora’s Box of election campaign abuse.

At a time when deep-pocketed corporations already control both political parties, and the cost of Campaign 2010 would hit nearly $4 billion — with Americans fighting to take their country back from the special interests, the Citizens United decision unleashed another $180 million in campaign ads, with $120 million coming from undisclosed sources.

Because of the SCOTUS decision, corporations, even those with significant foreign ownership, now have the power to directly influence American elections. How this can be a positive for our nation is a mystery. The Founding Fathers were certainly not advocates of such corporate power. They fully understood the truth expressed by Justice John Paul Stevens, in his dissenting opinion: “the corporation must engage the electoral process with the aim to enhance the profitability of the company, no matter how persuasive the argument for a broader or conflicting set of priorities.”

Corporations are not people, and what’s good for one is not necessarily good for the other. The Citizens United decision is an abomination upon the American system of government that runs counter to the ideal of one-person-one-vote. It virtually ensures that American corporations will continue to evade paying U.S. income tax while stoking profits with cheap foreign labor. It corrupts the very core of our founding and ensures that a “government of the people, by the people, for the people” will indeed perish from the Earth.

If you are a patriot, if you love your country and care about democracy, you’ll agree that, left or right, our government belongs to The People. Please raise your voice and say NO to the sale of our democracy — join your fellow Americans in ending corporate rule and Move to Amend.


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Sep 032010
 
The emblem of Recovery.gov, the official site ...
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In the nineteen months that President Obama has been in office, there’s no action that he’s taken, no policy that he’s supported that’s received more undeserved criticism than the federal stimulus. Consistently maligned by conservatives, the American Recovery and Reinvestment Act (ARRA), which passed the Congress with no Republican votes in the house and only 3 in the Senate, has significantly eased the impact of the Great Recession and continues to do so, while at the same time laying the foundation for a true 21st Century America.

Intended to create jobs and promote investment and consumer spending during the recession, it’s difficult to reconcile Republican objections to the ARRA, better known as the Stimulus. After all, they had all supported the TARP bailout, which sent the better part of a trillion dollars to the nation’s richest banks. But the Republicans stood in unity against a stimulus directed at helping middle and working class Americans. Some say that the opposition was purely political, just one of many attempts to block actions that might help the economy and improve the standing of the Democratic leadership.

That may well be the case, as there have certainly been a record number of obstructionist actions taken by Senate Republicans since Obama took office. But whether or not the Republican disregard for common Americans is behind their original opposition, it seems clearly to be reflected in their conspicuous attempts to discredit the positive impact the Stimulus has had.

Most recently, while unveiling first looks at the Republican plan for the future, House Minority Leader, John Boehner said that the Stimulus, “has gotten us nowhere.” Oddly enough, he made that statement after the nonpartisan Congressional Budget Office (CBO) report on the stimulus had been released. The CBO analysis concurred with the majority view of nonpartisan economists and found that the stimulus had raised the GDP by 1.7% to 4.5% and increased the number of people employed by 1.4 to 3.3 million. The report also concluded that the number of full-time-equivalent (FTE) jobs had been raised by between 2 million and 4.8 million. The truth is that the facts don’t support the conservative spin, so the Republicans don’t offer any facts, just sound bites like John Boehner’s fallacious claim.

Few and far between are any economists who would even marginally agree with Congressman Boehner. There may be debate over the extent of the impact, but no reputable person would even attempt to argue that the Stimulus “has gotten us nowhere.”  Mark Zandi, former economic advisor to John McCain, took issue with Boehner’s falsehood and stated that, “Without the stimulus spending, instead of a 9.5 percent unemployment rate, we’d have an 11.5 percent unemployment rate.” But of course, when people are still struggling in a stalled economy, it’s exceedingly difficult to sell the fact that it would have been so much worse.

Caring more about partisan politics than the health of the American economy or the wellbeing of the American people, Republicans have chosen to ignore the facts and rail on about how ineffective the Stimulus has been. The trouble is that, since they have no credible argument with which to discredit the macroeconomic effects of the program, such as the number of jobs created, they’ve been forced to try to put the spotlight on “waste.”

Reports of “wasteful projects” started the moment spending targets began to be identified. But the Republican spin machine hit a crescendo in early August when Senators John McCain (R-AZ) and Tom Coburn (R-OK) released their report highlighting 100 projects they deem to be wasteful. Headlining their list is a $308 million contract the senators identify as being with oil giant BP. Of course, their report fails to mention that the money was actually given to Hydrogen Energy California, a BP subsidiary, in September 2009 — long before the oil spill. The report is also conveniently silent on the fact that the award actually went to a 50/50 joint venture, so BP isn’t even the primary awardee, and also that only $175 million of the total came from stimulus funds, while the private sector invested seven times as much money in the project as did government.

This is not to suggest that the Stimulus is without waste; any program with thousands of discrete expenditures totaling over $800 billion is going to incur some spending that could be considered wasteful. But does this justify raking through the contracts in an attempt to find anything and everything that can possibly be labeled waste? Does it justify using half-truths to cast expenditures in an illegitimate light?

The report tags the $71,623 awarded to Wake Forest University Baptist Medical Center as funding a study on, “Monkeys Getting High for Science.” The truth is that monkeys are being used, but the study is actually directed at research regarding cocaine addiction and relapse in humans. Along similar lines is the report’s characterization of $554,763 spent to replace windows at a Mount St. Helens visitor’s center as wasteful — because the facility “was closed in 2007.” Terrible, huh? . . . unless you consider that the Forest Service is performing the renovations in order to repurpose the center, so that they can, “protect the original investment and ensure continued good use of taxpayer dollars.”

These are but a few examples of the distortions contained in the McCain/Coburn report. But whether or not you agree with Senator McCain that, “all of them are waste,” you still have to question his use of spin and what it says about his motives. This is especially true when, at the end of the day, even if you accept their entire list as “wasteful,” the $1.7 billion total is less than one-quarter of one percent of the total stimulus. This money is obviously nothing to sneeze at, but .002 waste is pretty damn good by any objective measure. The Pentagon, which David M. Walker, President of the conservative Peter G. Peterson Foundation and former comptroller general of the U.S., identified as a system, “so fundamentally flawed that billions of dollars in waste is virtually guaranteed every year,” would have to completely reinvent itself to even approach such efficiency. Yet do you hear any Republican cries to cut defense?

The honest truth is that the ARRA could have been handled better. It does include some waste and should probably have been more focused on very specific job-creating investments. But to say that the stimulus, “has manifestly failed,” as Republican candidate for Senate, Carly Fiorina did during last night’s senatorial debate, is to take spin and wind it up to the level of outright falsehood.

The ARRA, originally estimated to cost $787 billion but recently revised at $814 billion, was essentially divided into thirds, with one part each allocated for tax relief, entitlements, and contracts/grants. The tax relief component, with $223 billion spent out of the $288 billion allocated, provided tax cuts for 95% of Americans and also included $51 billion in tax relief for business. Entitlements, funded at $224 billion with only $143 billion spent thus far, consisted mostly of aid to states in the form of $86.8 billion for Medicaid, $53.6 billion to help local school districts and prevent further layoffs, and $82.2 billion to assist low income workers, the elderly, and the unemployed.

While little of the expenditures in these categories went directly to create new jobs, the money did save thousands of people from joining the ranks of the unemployed. It also ensured that those most adversely affected by the recession received relief. And it accomplished these ends while also putting the majority of the funds where they would be immediately spent and returned into the economy. This factor ensured sustainment of consumer spending, which amounts to 70% of the economy, and created the largest stimulating effect possible.

The final portion of the Stimulus, that marked for contracts, grants and loans, is really the forward facing job creation engine of the program. The original intent of this spending was to identify “shovel-ready” projects where the money could be put to immediate use. But far too few projects of that kind were found, so at present only $139 billion of the $275 billion allocated has been spent. But even so, exciting progress has been made, and if people can remove their partisan lenses for just a moment, they will see that this program is building the foundation for a better government, a stronger America, and a brighter future for all Americans.

Recipients of funding through the direct investment part of the Stimulus had reported a total of nearly 750,000 jobs funded by the program through the end of this past June. But these jobs are really just the beginning. The program has made over 215,000 awards, but because of the time requirements to ramp up production, less than 40% of the award money has been disbursed. The real promise of these investments is still in the future, and it will come in the form of new jobs, new industries and a transformation of government and certain sectors of American business.

Stimulus investments are focused in five critical areas: 1) to seed research and development, 2) to modernize transportation, 3) to jump start alternative energy, 4) to promote ground-breaking medical advancement, and 5) to establish a platform to enhance private sector infrastructure. Together, these areas represent a game plan for, not only moving our nation away from dependence on environmentally damaging foreign oil, but also for creating a new energy economy, building American capacity for the future and infusing existing industries with new technology.

One exciting example of how the Stimulus is paving the way to a prosperous green economy is the investment in advanced battery technology. Advanced batteries are critical to the deployment of alternative energy technologies from electric cars to smart grid-storage. Prior to the Stimulus, the U.S. produced only 2% of the world’s advanced batteries. But stimulus funding will create 30 new factories thereby increasing the U.S. share of battery production to 20% by 2012 and to 40% by 2015. Most of the associated projects are being seeded through grant money, like that awarded to A123 Systems of Watertown, Mass., who will be building two U.S. based factories with stimulus money. A123 is already a big player in the market, with 5 factories in China, but the Stimulus is moving them home. According to company CEO, Bart Riley, “Without government, there’s no way we would’ve done this in the U.S.” It should be noted that A123 held an IPO to raise the private capital that’s required to match public funding on all grant projects.

Carving a foothold for America in the growing market for advanced batteries is but one example of the Stimulus taking our nation where it needs to go. Funding has also been awarded to finance three of the world’s first electric-car plants, and because those cars will need charging, the Stimulus will also increase battery-charging stations by 3,200%. Other energy related projects include, $3.4 billion for clean coal, loan guarantees to facilitate the first new nuclear power plants in 30 years, and investment in wind and solar, including building the nation’s largest photovoltaic plant in Florida and the world’s two largest solar-thermal plants in Arizona and California. All together, $90 billion has been allocated to fund alternative energy infrastructure and efficiency — a fact that may provide a little more insight into Republican objections — since the Oil and Gas industry represents the only “Strongly Republican” lobby in Washington, sending 73% of their contributions to the right.

One signature project, also in the energy space but designed to address the nation’s woeful record on energy efficiency is the Weatherization Assistance Program. Most Americans know that the U.S. is the planet’s number one energy customer, actually consuming more than 20% of world supply. But much less widespread is the knowledge that over 57% of what’s consumed is actually wasted. With a goal to weatherize 600,000 homes, the weatherization program will begin to address this issue. The program has already completed 200,000 homes and continues to move forward at a rate of 25,000 homes per month and has created more than 13,000 jobs.

Energy is without doubt the center focus of stimulus spending, as it rightfully should be. Our nation’s ever-increasing dependence on foreign fossil fuels is amongst our most serious concerns in terms of national security, economic wellbeing, and environmental health. Energy independence should be a national priority, but the transition is extremely expensive, so market forces work against change and instead serve to preserve the status quo. The writing has been on the wall for more than 30 years, yet industry has moved forward at glacial pace. The sad truth being that it’s more profitable to continue to push fossil fuels. This is precisely the type of situation that demands government intervention — when the good of the nation is at conflict with the profit motive of business. The Stimulus is meeting this need and is on track to meet its goal of doubling alternative energy by 2012.

Rounding out other stimulus highlights are investment in transportation, healthcare, and infrastructure. One notable public transportation component is an $8 billion contribution for high-speed rail projects across the nation, including $2.3 billion for the system to connect the San Francisco Bay Area and Orange County. There’s also a $27.5 billion slice working to fund highway and bridge projects across the country. On the healthcare front is $20 billion to move health records into the digital age, an endeavor that constitutes real healthcare reform and promises to deliver both improved care and lowered costs. Other infrastructure investments include $7.2 billion to extend broadband access, much into rural areas, and also $11 billion for electrical grid improvements. The focus on a smart-grid is essential for maximizing energy efficiency, and both the broadband and grid improvements will lay the groundwork for trillions of dollars in future utility investments.

And not only is the Stimulus transforming America, but also the federal government. Unlike the Defense Department tradition of doling out contracts without bids, the Stimulus launched the Advanced Research Projects Agency-Energy (ARPA-E) to ensure fierce competition for grant money. Modeled after DARPA, the Pentagon agency that gave us the Internet and GPS, ARPA-E recruited a host of outside experts to evaluate grant applications and winnow the 3,700 received down to the 37 awarded in the first round. Several of these grants will fund research that would otherwise be too expensive for profit-minded businesses, and if successful, the upside is absolutely immense. The intent is to create new industries, to solve longstanding problems, to reinvent the economy — these investments have the potential to create millions of jobs.

Anyone who really believes in America owes it to themselves to look deeper into the success and potential of the Stimulus. They should visit Recovery.gov and get more information. They should understand that this is the most transparent program ever instituted by the federal government, that all program details are readily available online, that program administration provides a 24-hour response to all state and local government queries, and that the Recovery Accountability and Transparency Board was established to prevent fraud and waste. The Board gives citizens the ability to help police projects with several means to report suspicious activity, and has already helped to block some 260 projects for skate parks, picnic tables and highway beautification.

It’s difficult to understand the mindset that would hold the Stimulus program in a negative light. Detractors want to discredit the program with trumped up examples of waste. Deficit hawks want to derail progress by convincing the people we can’t afford the investment, when in truth they simply want to maintain the status quo. They know that our nation recovered easily from a debt that was 122% of GDP after World War 2, and that we currently sit at only 94%. But they also know that it was higher taxes on the most wealthy that funded the recovery and paved the way to a flourishing economy and a strong middle class. And this they will fight with every lie and distortion they can muster.

The stimulus is exactly the prescription for America’s prosperous transition into the 21st Century. Where better to spend American tax dollars than on the core needs and functions of our society, on our infrastructure, on healthcare, on education, on creating industries to fight energy dependence and create American exports? Are we better served with spending trillions on foreign wars, on maintaining a military presence to defend Europe and Japan? Perhaps the money should go to bigger bonuses on Wall Street or higher pay for CEOs? The answers are clear. The stimulus investments are our future. They are the path back to prosperity, to jobs, to the strengthening of the American middle class. The Stimulus program represents the way a government of the People, by the People, and for the People should act.

The only real negative about the Stimulus is that President Obama listened to Tim Geithner and Larry Summers instead of Christina Romer. Had he taken her sage advice, the Stimulus would have been $1.2 trillion, and America would be that much closer to emerging from this greed-spawned recession into a bright and green future.


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Aug 302010
 
Small Businesses 4
Image by Angela Radulescu via Flickr

President Obama spoke briefly from the Rose Garden this morning about the economy. He acknowledged that the recovery is still fragile, but offered assurances that his team was, “hard at work on additional measures.” He offered few details, but pulled no punches in blasting GOP leaders for their obstruction of relief for small business. “I ask Senate Republicans to drop the blockade,” the President urged, referring to the persistent GOP filibuster of a small business aid bill that’s been stalled in the Senate since shortly after the House passed similar legislation this past March.

The small business aid bill, last blocked from going to the Senate floor at the end of July, includes $12 billion in tax relief and also creates a $30 billion fund intended to facilitate lending to small businesses. The tax breaks, designed to stimulate growth, include deductions for capital equipment investment and credits for new hires. With the large banks still withholding any funding for small business, the loan fund is designed to allow community and regional banks, those with assets under $10 billion, to fill the void. Small businesses need money to expand, and according to Bob Coleman, publisher of the Coleman Report, which provides information on small-business lending, many businesses are postponing expansion while they wait on the outcome of this bill.

Republicans in the Senate have spoken out against the bill, likening it to the TARP, which they all supported, but which has since fallen into disrepute. They label the bill as more Democrat spending, even though it’s fully paid for. Senate Minority Leader, Mitch McConnell explained that the Republicans had already been given 3 amendments to the bill, but that “three amendments is not enough.” Democrats countered that the border security provision offered by Republicans had nothing to do with small business, and that they would not allow the Republican maneuver to add a permanent extension to the Bush tax cuts. Republicans also complained about the $1.5 billion in aid to farmers contained in the bill, so Democrats removed the provision, but were still not able to sway any Republican support.

In his speech today, President Obama stated of the bill that, “there’s no reason to block it besides pure partisan politics.” Dean Baker, of the Center for Economic and Policy Research seems to be in agreement. Speaking in July, he characterized the standoff like this, “The Democrats want to hand money out to small banks and win some support among traditionally Republican backers, while the Republicans don’t want the Democrats to have any achievements to show when they campaign.” Even the U.S. Chamber of Commerce, who typically sides with Republicans, is fully in favor of the legislation.

So, how is it that the Party who purports to be a champion of small business, comes to resist, so adamantly, a bill designed to help that very segment? This is the same party that bases their defense of extending the Bush tax cuts for the rich on the detriment their expiration would have on small business, yet they won’t support this fully funded stimulus. Conservative voters should take heed, because this is just another piece, amongst a vast body of evidence that indicates where Republican loyalties are tied.

President Obama did mention a few other examples of efforts being pursued by his administration. He emphasized that they were still fighting for the extension of the Bush tax cuts for the middle class. Although he gave no indication of how they might achieve that without also extending the cuts for the rich. They are incapable without GOP support, and thus far, Senate Republicans remain firm in their resolve to force an across the board extension, that adds $678 billion to the deficit from relief for the rich, or nothing at all.

The President stated that further tax cuts to encourage businesses to create jobs in the U.S. were being considered. He also listed initiatives being pursued, such as, “rebuilding more infrastructure for the future” and “redoubling our investment in clean energy and research and development.” But he gave no details on these items, nor did he even mention the current stimulus, which is actively moving these initiatives forward. The stimulus which is so often maligned by conservatives, but credited by economists for avoiding 2 addition percentage points of unemployment and adding millions of jobs, is also providing a critical service in moving our nation into a clean, alternative energy future and building infrastructure in the areas of public transportation and a smart grid.

Much to the disappointment of many progressives, the President’s speech failed to clearly identify the severity of our current economic problems or the details of the administrations plan to address them. With both consumers and businesses tucking their money away, there’s little hope that things will change without further stimulus, but in an election year where the deficit hawks are out hunting for prey, Democrats appear to lack the resolve to promote such a bold action. The alternative is obviously a very slow recovery in which the middle class foots the lion’s share of the bill — and minus the public wherewithal to understand that the deficit has merely been presented to conveniently block further corrective action, we appear to be doomed to stew in this status quo.


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